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The world’s biggest maker of mining and construction equipment is predicting that the pain from the coronavirus crisis is far from over.
Caterpillar Inc. said the current quarter will be “more significantly impacted” by the virus after profits for the first three months of the year trailed analysts estimates. The Deerfield, Illinois-based company also shelved its traditional earnings forecast for 2020 as the fallout from the pandemic jolts customers in mining, construction and energy.
Caterpillar is taking steps to slash costs and pare production in the face of deteriorating commodity markets that stand to crush demand for the company’s signature yellow machines. BofA Securities Inc. analyst Ross Gilardi downgraded its stock this month, and said that weakness in the company’s energy business was “a problem that is not going away.”
U.S. crude drilling is sliding amid a historic rout in prices, and Saudi Arabia has started reducing output ahead of the start date for OPEC+ oil-supply cuts, and an immense global surplus means storage tanks are close to capacity around the world.
Last month, Caterpillar withdrew its earlier 2020 financial guidance and said it would temporarily suspend operations at some facilities as the virus hobbles supply chains.
Less than a week after Caterpillar said it would suspend some production, the company decided to freeze pay for executives and salaried workers. The manufacturer also confirmed last month that it laid off employees at its East Peoria building KK as part of actions taken to reduce production due to weaker customer demand.
Caterpillar got a revolving credit facility of up to $3.875 billion last week, indicating that it is beefing up liquidity amid potential fallout from the coronavirus pandemic.
Revenue declines in all three main business segments could reach double digits in 2020, according to Karen Ubelhart of Bloomberg Intelligence, and analysts at Morgan Stanley said the decrease in those segments has the potential to continue into 2021.
The statement was released before the start of regular trading in New York, where Caterpillar shares were little changed. The stock dropped about 21% in the first three months of the year.
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